Sainsbury cuts dividend payout

IanWalker

LONDON--J Sainsbury PLC (SBRY.LN) Wednesday reported a swing to pretax profit for fiscal 2016, but cut its dividend payout as it continues to manage costs.

The U.K.'s second largest grocer by market share added that it achieved 225 million pounds ($327.38 million) of cost savings in the year ended March 12, and expects to save around GBP120 million next year. It added that the company is on track to deliver the three-year GBP500 million target by the end of fiscal 2018.

The company, which is in the middle of a GBP1.4 billion takeover for Argos owner Home Retail Group PLC (HOME.LN), made a pretax profit for the year of GBP548 million, compared with a loss of GBP72 million a year earlier, on sales excluding value-added tax and including fuel of GBP23.51 billion and GBP23.78 billion respectively.

The board has cut the final dividend to 8.1 pence a share, from 8.2 pence a year earlier, taking the total payout for the year to 12.1 pence, down from 13.2 pence in fiscal 2015.

In March, Home Retail recommended the 171.5 pence a share offer by Sainsbury's, ending a four-month-long battle to buy it. The price includes 0.321 in Sainsbury's shares, 55 pence in cash, 25 pence a share reflecting a GBP200 million planned return to shareholders from the Homebase sale, and 2.8 pence in lieu of the Home Retail final dividend.

The offer is expected to complete in the third quarter of this year, provided it gets shareholder and regulatory approvals.

An approach by Sainsbury for Home Retail last November was rejected but in February the two companies tentatively agreed terms.

Based on the latest data from Kantar, which monitors the household-grocery purchasing habits of 25,000 demographically representative households in the U.K., Sainsbury's had a market share of 16.4% in the 12 weeks ended March 27, behind Tesco PLC (TSCO.LN) which had a 28.1% share.

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